USD/CNH is now predicted to navigate within the 7.2800-7.3400 range in the next few weeks, argue Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

Considering advanced readings from CME Group for natural gas futures markets, open interest went up by around 5.1K contracts after two consecutive daily pullbacks on Wednesday. In the same line, volume rose by around 18K contracts, reversing two consecutive daily builds.

Natural Gas: Immediate support comes at $2.60

Wednesday’s downtick in prices of natural gas was on the back of rising open interest, which suggests that extra downside appears likely in the very near term. In the meantime, the weekly low around the $2.60 region per MMBtu (September 18) initially emerges as an interim support for the time being.

Norges Bank is widely expected to raise rates by 25 bps. Economists at ING analyze NOK outlook ahead of the Interest Rate Decision.

NOK could receive some short-term support, but a longer recovery relies on external drivers

Swiss National Bank (SNB) meets today. Economists at ING analyze EUR/CHF ahead of the Interest Rate Decision.

SNB to hike the policy rate by 25 bps 

• Gold price maintains its position around $1,930 ahead of US economic data.
• Fed’s hawkish stance on interest rate trajectory bolsters the US Dollar (USD).
• Higher US bond yields are weakening the non-yield-bearing assets like the Gold.

Gold price hovers around $1,930 during the early trading hours of the European session on Thursday. Investors seem to shift their focus on upcoming US data after the US Federal Reserve’s (Fed) decision on policy rates.

However, the Fed's hawkish stance on interest rates trajectory exerts pressure on the prices of the yellow metal.

As expected, the Federal Reserve opted to maintain the current benchmark policy rates at 5.5% during the meeting held on Wednesday.

Moreover, it is anticipated that the central bank will pursue an additional rate hike in 2023, in line with the Federal Open Market Committee's (FOMC) projection of slightly higher inflation compared to its previous forecasts.

Hence, Federal Reserve officials unexpectedly revised their projected interest rates for 2024, increasing them from 4.6% to 5.1%. This adjustment played a significant role in supporting the US Dollar (USD).

The US Dollar Index (DXY), which measures the Greenback's performance against six other major currencies, extends its gains and trades at a six-month high of around 105.50.

Additionally, higher US Treasury yields have contributed to the US Dollar's strength and increased the opportunity cost of holding non-interest-bearing assets like Gold. The yield on the 10-year US Treasury note has risen to 4.43%, the highest level since 2007.

Moreover, in a press conference held immediately after the rate decision on Wednesday, Federal Reserve Chair Jerome Powell reiterated the Fed's commitment to achieving its long-term inflation target of 2%. Powell also suggested that the central bank is likely approaching the peak of its interest rate hike cycle, but he emphasized that future policy decisions would be based on data-driven analysis.

Investors will closely monitor the upcoming data releases from the United States (US) scheduled for Thursday. This data includes the weekly Initial Jobless Claims, the Philadelphia Fed Manufacturing Survey, and the change in Existing Home Sales.

These reports can provide valuable insights into the health of the US labor market, manufacturing sector, and real estate market, which are all important factors influencing economic sentiment.

• USD/CAD gains traction near the 1.3500 psychological mark amid the renewed USD.
• The pair holds below the 50- and 100-hour EMAs; Relative Strength Index (RSI) stands in bullish territory above 50.
• The first resistance level is seen at 1.3510; the initial support level is located at 1.3465.

The USD/CAD pair trades in positive territory for the second straight day during the early European session on Thursday.  The pair's recovery is bolstered by the Federal Reserve's (Fed) hawkish stance after holding the interest rate unchanged in its policy meeting on Wednesday. Additionally, a decline in oil prices weighs on the commodity-linked Loonie as the country is the leading oil exporter to the United States. The pair currently trades near 1.3495, gaining 0.26% on the day.

According to the four-hour chart, USD/CAD holds below the 50- and 100-hour Exponential Moving Averages (EMAs) with a downward slope, which supports the sellers for the time being.

The first resistance level for the pair is seen near the 50-hour EMA at 1.3510. The additional upside filter to watch is near the confluence of the 100-hour EMA and the upper boundary of the Bollinger Band at 1.3530. Any follow-through buying above the latter will pave the way to a high of September 13 at 1.3586, followed by a psychological round figure at 1.3600.

Looking at the downside, the initial support level is located at 1.3465 (a high of September 20). The critical contention is seen at the 1.3400-1.3410 region, representing a psychological figure, the lower limit of Bollinger Band and a low of August 11. Further south, the next downside stop will emerge at 1.3380 (a low of September 19).

It’s worth noting that the Relative Strength Index (RSI) stands above 50, activating the bullish momentum for the USD/CAD pair for the USD/CAD pair.

USD/CAD four-hour chart

The Riksbank meets today. Economists at ING analyze SEK outlook ahead of the Interest Rate Decision.

A crucial moment for SEK

It took the Dollar a moment before it was able to benefit from Wednesday’s FOMC decision. Esther Reichelt, FX Analyst at Commerzbank, analyzes Greenback’s outlook.

Ammunition for the Dollar bulls

The FOMC kept rates on hold while projecting one more hike this year, economists at the National Bank of Canada report.

Proceeding carefully but upward “dot drift” on clear display

Here is what you need to know on Thursday, September 21:

The US Dollar (USD) gathered strength in the late American session on Wednesday and the USD Index reached a fresh multi-month high above 105.50 early Thursday as investors reacted to the Federal Reserve's (Fed) hawkish rate pause. The Swiss National Bank (SNB) and the Bank of England (BoE) will announce policy decisions in the European session. Later in the day, the US economic docket will feature weekly Initial Jobless Claims and August Existing Home Sales data.

The Fed left its policy rate unchanged at 5.25%-5.5% as expected following the September policy meeting. The revised Summary of Economic Projections (SEP) - the so-called dot plot, however, confirmed that the US central bank was on track to raise the policy rate by another 25 basis points before the end of the year. Additionally, policymakers now see a total of 50 bps rate cuts next year, compared to the 100 bps rate cut projection seen in June's dot plot. While speaking in the post-meeting press conference, "majority of policymakers believe it is more likely than not another rate hike will be appropriate," FOMC Chairman Jerome Powell said.

USD/CHF gained traction and climbed above 0.9000 for the first time since early July on Thursday. The SNB is forecast to raise the policy rate by 25 basis points to 2%.

The BoE is forecast to lift its key rate to 5.5% from 5.25%. Following Wednesday's soft inflation readings, several institutions noted that they were now expecting the BoE to hold the rate steady. There will not be a press conference and markets will pay close attention to the vote split and scrutinize the policy statement. GBP/USD suffered large losses on Wednesday and continued to push lower on Thursday. At the time of press, the pair was trading at its weakest level since May slightly above 1.2300.

UK Interest Rate Decision Preview: BoE hike hangs in the balance as inflation cools.

After rising above 1.0700 during the European trading hours on Wednesday, EUR/USD reversed its direction in the late American session and closed the day in negative territory. The pair extended its slide early Thursday and touched its lowest level since March below 1.0620 before recovering toward 1.0650.

USD/JPY gathered bullish momentum and advanced to its strongest level since November above 148.00. The Bank of Japan (BoJ) will announce monetary policy decisions in the Asian session on Friday.

Gold price came within a touching distance of $1,950 ahead of the Fed event on Wednesday but erased all of its daily gains to close in negative territory as the benchmark 10-year US Treasury bond yield climbed above 4.4% on hawkish dot plot. Early Thursday, XAU/USD holds steady at around $1,930. 

Türkiye's central bank (CBT) holds its monthly rate meeting today. The Lira has kept creeping weaker and breached the psychological 27.00 level versus the Dollar. Economists at Commerzbank analyze USD/TRY outlook.

Today’s rate hike can at best add some volatility to the Lira

In an interview with an Irish newspaper on Thursday, European Central Bank (ECB) policymaker Gabriel Makhlouf said that “a further rate hike is possible.”

Additional comments

Market reaction

EUR/USD seems to be finding fresh demand on the hawkish comments, recovering to 1.0640, still down 0.18% on the day.

FX option expiries for Sept 21 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts

• 1.0600 1.8b
• 1.0640-50 771m
• 1.0675 832m
• 1.0700-10 1.5b
• 1.0725 555m
• 1.0745-50 1.6b

- GBP/USD: GBP amounts     

• 1.2300-05 853m
• 1.2330-35 623m
• 1.2350 211m
• 1.2400 375m

- USD/JPY: USD amounts                     

• 147.50 316m
• 148.00 619m
• 148.50 406m
• 149.75 600m

- USD/CHF: USD amounts        

• 0.8890-0.8900 571m
•  0.8950 290m

- AUD/USD: AUD amounts

• 0.6275 744m
• 0.6450 1b
• 0.6500 1b

- EUR/GBP: EUR amounts        

• 0.8625 471m
• 0.8645 324m
• 0.8660 250m
• 0.8700-05 558m

- EUR/JPY: EUR amounts

• 157.50 230m
• 157.70 290m
• 158.50 205m

Economists at Danske Bank discuss EUR/GBP outlook ahead of the Bank of England (BoE) meeting.

GBP headwinds to set in

Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group see the door open for USD/JPY to reach the 149.00 region.

Key Quotes

• EUR/USD experiences pressure due to the Fed's projection of an additional rate hike in 2023.
• MACD line levels with the signal line, suggesting that recent momentum is relatively neutral.
• Six-month low lined up with the 1.0600 psychological level could act as immediate support.

EUR/USD extends the losses for the third successive day. Spot price is trading lower around 1.0640 during the Asian session on Thursday. As expected, the US Federal Reserve (Fed) chose to maintain the current benchmark policy rates at 5.5% during the meeting convened on Wednesday.

The Fed's projection of an additional rate hike in 2023 has exerted downward pressure on the EUR/USD pair. Furthermore, in its monetary policy statement, the Federal Open Market Committee (FOMC) has indicated an anticipation of slightly higher inflation compared to its previous forecasts.

The six-month low at 1.0616 marked on Thursday could act as immediate support, followed by the 1.0600 psychological level.

On the upside, the 18-day Exponential Moving Average (EMA) at 1.0728 appears to be the key barrier aligned to the 21-day EMA at the 1.0742 level.

A break above the latter could provide support for the pair to navigate the region around the 23.6% Fibonacci retracement at 1.0772, followed by the 1.0800 psychological level.

The Moving Average Convergence Divergence (MACD) line remains below the centerline but is at the same level as the signal line. This configuration suggests that the momentum in the underlying asset's price is relatively neutral, with neither bullish nor bearish dominance.

However, the momentum in the EUR/USD pair indicates bearish sentiment in the market as the 14-day Relative Strength Index (RSI) remains below the 50 level.

EUR/USD: Daily Chart

CME Group’s flash data for crude oil futures markets noted traders reduced their open interest positions for yet another session on Wednesday, this time by around 9.5K contracts. In the same line, volume remained choppy and went down by around 382.1K contracts, setting aside the previous daily build.

WTI: Further downside appears contained

WTI prices extended the rejection from the 2023 high, breaking below the key $90.00 barrier per barrel on Wednesday. The downtick was on the back of shrinking open interest and volume and suggests that a sustained decline appears not favoured for the time being. On the downside, there is a provisional support at the 55-day SMA, today at $81.87.

• The UK central bank is on track for another 25 bps hike on Thursday, lifting interest rate to 5.50%.
• The Bank of England could signal the end of its tightening cycle as economic woes mount.
• Pound Sterling set to rock after surprise fall in UK inflation raises odds of a BoE rate hike pause.  

The Bank of England (BoE) is set for the fifteenth consecutive interest rate hike since December 2021 on Thursday. The Pound Sterling (GBP) is poised for a big reaction even though it is not a ‘Super Thursday’, as it could probably be the final lift-off for one of the United Kingdom’s (UK) greatest tightening cycles in the last century.

However, markets have recently lowered expectations of a rate increase after UK inflation in August came in softer than expected.

Bank of England Interest Rate Decision: What to know in markets on Thursday, September 21

• GBP/USD remains vulnerable near five-month lows of 1.2304, as the US Dollar (USD) clinches fresh a six-month high. 
• The US Dollar and the US Treasury bond yields continue to soar on the hawkish US Federal Reserve (Fed) rate hike pause.
• The Summary of Economic Projections (SEP), the so-called ‘Dot Plot’ chart, showed that the “Fed projections imply one more 25 basis points (bps) rate hike this year and 50 bps of rate cuts in 2024, versus 100 bps of 2024 cuts in June projections.”
• US S&P 500 futures drop amid risk-aversion on the Fed’s ‘high for longer’ interest rate view. 
• The BoE policy guidance will hold the key for a clear directional impetus for the GBP/USD pair while the Jobless Claims and Existing Home Sales data from the United States will also entertain Cable traders.

When will the BoE announce its interest rate decision and how could it affect GBP/USD?

The Bank of England is widely expected to raise the benchmark interest rate, the Bank Rate, by 25 basis points (bps) from 5.25% to 5.50% at 11:00 GMT, taking borrowing costs to the highest level since 2007.

The big question is whether it will be the last hurrah for the BoE hawks. The UK central bank could take the lead from the European Central Bank (ECB) and deliver a dovish hike by signaling the end of its rate hike cycle amid increasing risks of stagflation.

In the second quarter, the UK economy defied expectations of stagnation, expanding by 0.2% in the second quarter. However, economists say that the growth outlook appeared grim, as the impact of higher rates had still not fully fed through.

Meanwhile, the Unemployment Rate climbed to 4.3% in the quarter through July from the 4.2% seen during the three months to June. The economy saw an employment loss of 207K in July, having shredded 66K jobs in June. Average Earnings excluding bonuses rose 7.8% 3M YoY in July as expected but at a joint-record pace.

Against the backdrop of a slowing economy and loosening labor market conditions, the BoE could be well-positioned to hint at a pause after the expected rate hike. Goldman Sachs and Citigroup expect Thursday's decision to be the BoE's last rate hike.

Governor Andrew Bailey said earlier this month that the BoE was "much nearer" to ending its tightening cycle. On the other hand, Catherine Mann, a member of the BoE Monetary Policy Committee (MPC), said last week, “I would rather err on the side of over-tightening,” adding that underestimating the persistence of inflation will lead to an overshoot. 

However, the unexpected fall in the UK inflation cast clouds on the BoE’s rate hike plan on Thursday. Bailey and his colleagues could opt for a pause, as services inflation points to easing inflationary pressures. 

The Office for National Statistics (ONS) said on Wednesday that the UK annual Consumer Price Index (CPI) edged 6.7% higher in August, cooling off from a 6.8% rise in July. The market consensus was for a 7.1% increase. 

The Services CPI rose 6.8% YoY vs. July’s 7.4% surge. The ONS said, “the largest downward contributions to CPI rates came from food and accommodation services.”

Markets are pricing a 50% probability of a 25 bps rate increase by the Bank of England, down sharply from an 80% chance seen before the UK inflation data.

Analysts at TD Securities (TDS) noted: “Upside surprises to wage data are enough to justify a 25bps hike, but Wednesday's downside shock to August inflation and worries about tepid GDP growth and a rapidly rising unemployment rate lead the MPC to soften forward guidance and votes skew toward a hold, effectively signaling an end to the hiking cycle.”

If the Bank of England delivers a dovish message alongside a 25 bps rate hike or decides to put brakes on its tightening cycle, GBP/USD is likely to see a fresh downswing toward the 1.2250 psychological level. In case the Bank hints at a possibility of one more rate hike by the turn of the year, the Pound Sterling could stage a decent recovery toward the 1.2500 threshold.

Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for the major and explains: “Having consolidated the downside break below the critical 200-Daily Moving Average (DMA) at 1.2433 so far this week, GBP/USD is extending the downtrend even as the 14-day Relative Strength Index (RSI) has entered the oversold territory, suggesting that the pair risks a correction from the multi-month trough.”

Dhwani also outlines important technical levels to trade the GBP/USD pair: “On the upside, recapturing the 200 DMA support-turned-resistance is critical to initiating any meaningful recovery toward the 1.2500 figure. Further up, the descending 21 DMA at 1.2520 will challenge Pound Sterling buyers. Conversely, the immediate support aligns at the April low of 1.2275, below which a sell-off toward the 1.2200 threshold cannot be ruled out.”

In the view of Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group, NZD/USD is now likely to trade within a range bound theme.

Key Quotes

• USD/CHF extends its upside for the third straight day, hovering around the 0.9000 area.
• The pair holds above the 50- and 100-hour EMAs; Overbought RSI condition indicates that further consolidation cannot be ruled out.
• The immediate resistance level emerges at 0.9032; 0.8906 acts as a critical support level for the pair.

The USD/CHF pair gains momentum near the 0.9000 psychological mark during the early European session on Thursday. Market players await the Swiss National Bank (SNB) interest rate decision later in the day.

SNB is expected to raise additional interest rates by 25 basis points (bps) from 1.75% to 2% on Thursday. However, if SNB offers hints about its last hike, the monetary policy divergences between the US and Switzerland might continue to drive the pair higher.

On the US Dollar front, the Federal Reserve (Fed) held interest rates unchanged at the 5.25-5.50% range on Wednesday, as widely predicted in the market. Fed Chairman Jerome Powell reaffirmed the Fed's commitment to achieving 2% inflation in a press conference while mentioning that the Fed is ready to raise rates if necessary. These hawkish remarks boost the Greenback against the Swiss Franc and act as a tailwind for the USD/CHF pair.

According to the four-hour chart, USD/CHF holds above the 50- and 100-hour Exponential Moving Averages (EMAs), which means the path of least resistance for the pair is to the upside. The Relative Strength Index (RSI) holds in bullish territory above 50. However, the overbought condition indicates that further consolidation cannot be ruled out before positioning for any near-term USD/CHF appreciation.

That said, the immediate resistance level for USD/CHF will emerge near the upper boundary of the Bollinger Band at 0.9032. The additional upside filter is located at 0.9060 (a high of May 19) en route to 0.9073 (a high of May 25) and finally at 0.9105 (a high of June 8).

On the downside, the 100-hour EMA at 0.8906 acts as a critical support level for the pair. Further south, the next stop of the USD/CHF pair is located at 0.8870 (the 50-hour EMA), followed by a psychological round figure at 0.8800. Any intraday pullback below the latter would expose the next downside stop at 0.8775, portraying the confluence of the lower limit of the Bollinger Band and a low of August 23.

USD/CHF four-hour chart

• The index adds to the weekly uptrend and revisits 105.70.
• Investors continue to digest Wednesday’s hawkish hold by. The Fed.
• Weekly Claims, Philly Fed Index take centre stage in the US docket.

The greenback gathers extra steam and climbs to fresh six-month tops near 105.70 when gauged by the USD Index (DXY) on Thursday.

USD Index now looks at data

The index advances for the third session in a row so far on Thursday as market participants continue to assess Wednesday’s decision by the Federal Reserve to keep rates unchanged, as widely anticipated.

The dollar derived extra strength in response to the upbeat assessment of the US economic growth by the Fed and prospects of another 25 bps rate hike before the end of the year.

The continuation of the march north in the dollar so far appears underpinned by the equally robust pace of US yields across the curve, where the short end navigates levels last seen in July 2006 near 5.20%.

In the US docket, usual weekly Initial Claims are due seconded by the Philly Fed Manufacturing Index, the CB Leading Index and Existing Home Sales.

What to look for around USD

The index grabs fresh oxygen and advances to new multi-session highs near 105.70 in the wake of the FOMC event.

In the meantime, support for the dollar keeps coming from the good health of the US economy, which at the same time appears underpinned by the tighter-for-longer stance narrative from the Federal Reserve.

Key events in the US this week: Initial Jobless Claims, Philly Fed Index, CB Leading Index,  Existing Home Sales (Thursday) – Flash Manufacturing/Services PMIs (Friday).

Eminent issues on the back boiler: Persevering debate over a soft or hard landing for the US economy. Incipient speculation of rate cuts in early 2024. Geopolitical effervescence vs. Russia and China.

USD Index relevant levels

Now, the index is up 0.24% at 105.58 and a breakout of 105.68 (monthly high September 21) would open the door to 105.88 (2023 high March 8) and finally 106.00 (round level). On the other hand, initial support emerges at 104.42 (weekly low September 11) ahead of 103.04 (200-day SMA) and then 102.93 (weekly low August 30).

Further downside in GBP/USD remains in the pipeline and could motivate the pair to break below the 1.2300 region in the near term, suggest Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

Open interest in gold futures markets rose by nearly 10K contracts after two consecutive daily drops on Wednesday, according to preliminary readings from CME Group. Volume followed suit and went up by more than 94K contracts following three straight daily drops.

Gold faces the next contention around $1900

Prices of gold rose to multi-session peaks around the $1945, just to come all the way down and close Wednesday’s session with modest losses. The marginal pullback was on the back of increasing open interest and volume, which leaves room for further losses in the very near term. That said, next on the downside emerges the key contention area around the $1900 region per troy ounce.

EUR/USD is now expected to trade within the 1.0590-1.0730 range in the next few weeks, according to Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

• Asian equities trade in negative territory after the Federal Reserve (Fed) held the interest rate unchanged.
• Bank of Japan (BoJ) is expected to maintain monetary policy on Friday.
• Central bank officials in the Philippines and Indonesia will announce monetary policy decisions.

Asian stocks trade lower on Thursday amid the higher-for-longer interest rate narrative in the US following the Federal Reserve (Fed) meeting.

At press time, China’s Shanghai is down 0.59% to 3,090, the Shenzhen Component Index declines 0.71% to 10,001. South Korea’s KOSPI, Hong Kong’s Hang Seng, and the Nikkei 225 are the worst performers for the day. Hang Sang falls 1.31% to 17,651, Kospi drops 1.61% and Japan’s Nikkei falls 1.25%.

In China, the People's Bank of China (PBoC) maintained benchmark lending rates steady on Wednesday, as expected by the market. The one-year Loan Prime Rate (LPR), was kept at 3.45%, while the five-year LPR was unchanged at 4.20%. However, investors remain concerned about the economic slowdown in the second’s world largest economies.

In Japan, the Bank of Japan (BoJ) interest rate decision will be the highlight on Friday. BoJ is widely expected to keep its short-term interest rate target of -0.1% and its 10-year bond yield target of around 0%. The Japanese central bank has previously declared that monetary policy shifts would not be considered until local wage and inflation data meet its projections.

Former top currency diplomat Takehiko Nakao said on Wednesday that Japanese authorities could intervene in FX again to support the yen if it declines further.

On Thursday, central bank officials in the Philippines and Indonesia will announce monetary policy decisions. The Bangko Sentral ng Pilipinas is expected to raise rates by a quarter point, while the Indonesian central bank is expected to maintain rates unchanged.

The closely watched event this week will be the BoJ meeting on Friday. On the US docket, the US weekly Jobless Claims, the Philly Fed, and Existing Home Sales will be due later on Thursday and the preliminary US S&P Global PMI for September will be released on Friday.

• Natural Gas price attracts some dip-buying on Thursday and reverses a part of the overnight slide.
• The technical setup still seems tilted in favour of bulls and supports prospects for additional gains.
• A break below the ascending channel/100-day SMA confluence should negate the positive outlook.

Natural Gas price edges higher during the Asian session on Thursday and reverses a part of the previous day's heavy losses, though the intraday uptick lacks bullish conviction. The XNG/USD currently trades around the $2.9430 region, up over 0.50% for the day, and for now, seems to have stalled this week's retracement slide from the vicinity of a multi-month top touched in August.

From a technical perspective, the recent move-up witnessed over the past four months or so has been along an upward-sloping channel, which points to a well-established short-term uptrend. The subsequent breakout through and acceptance above the very important 200-day Simple Moving Average (SMA) favours bullish traders. This, along with the fact that oscillators on the daily chart are holding comfortably in the positive territory and are still far from being in the overbought zone, suggests that the path of least resistance for the XNG/USD pair is to the upside.

That said, a bullish rejection near the $3.0620 level, ahead of the August swing high, warrants some caution before positioning for additional gains. The overnight trough, around the $2.9000 area, however, might now protect the immediate downside ahead of the $2.8850 region and the weekly low, around the $2.8520 zone. The latter coincides with the 200-day SMA, which if broken will expose the monthly trough, around the $2.7150 area. The XNG/USD could drop further to test the ascending channel support near the $2.700 area and the 100-day SMA around $2.6500.

Some follow-through selling below the latter will suggest that the recovery from the $2.1780 area, or a multi-year low touched in June has run its course and shift the near-term bias back in favour of bearish traders.

On the flip side, any subsequent intraday move-up is likely to confront stiff resistance ahead of the $3.0000 psychological mark. The next relevant hurdle is pegged near the $3.0200 area, above which the XNG/USD could climb to challenge the $3.0620-$3.0650 supply zone. A sustained strength beyond should pave the way for a move towards testing the top boundary of the aforementioned trend-channel, currently pegged around the $3.2550 region.

XNG/USD daily chart

• GBP/USD extends its losses on the second successive day on the Fed's hawkish tone.
• Fed revised the projected interest rates for 2024, elevating them from 4.6% to 5.1%.
• The market expects an imminent halt in the BoE’s interest rate-hike cycle due to UK soft data on Wednesday.

GBP/USD expands losses on the second successive day, trading lower around 1.2320 during the Asian session on Thursday. US Federal Reserve’s (Fed) hawkish stance exerts downward pressure on the pair.

As anticipated, the Fed chose to keep the existing benchmark policy rates unchanged at 5.5% during the meeting held on Wednesday.

The central bank is expected to attempt an additional rate hike in 2023, following the Federal Open Market Committee’s (FOMC) expectation for slightly elevated inflation compared to its previous forecasts.

Therefore, Fed officials unexpectedly revised their projected interest rates for 2024, increasing them from 4.6% to 5.1%, which contributes to the support in underpinning the US Dollar (USD).

US Dollar Index (DXY), which gauges the performance of the Greenback against the six other major currencies, extends its gains and trades a six-month high of around 105.50 at the time of writing. Additionally, Higher US Treasury yields help the buck to rise.

The yield on 10-year US note rose to 4.43% by the press time, the highest since 2007.

Furthermore, during a press conference held immediately after the rate decision, Federal Reserve Chair Jerome Powell reiterated the Fed's dedication to achieving its long-term inflation target of 2%.

Powell indicated that the central bank is probably nearing the apex of its interest rate hike cycle, yet he underscored that forthcoming policy determination would hinge on data-driven analysis.

On the GBP side, the anticipation of an imminent halt in the Bank of England's (BoE) cycle of raising interest rates continues to exert downward pressure on the British Pound, causing the GBP/USD pair to decline.

Market sentiment experienced a significant shift following the release of UK data on Wednesday, which showed that the annual headline Consumer Price Index (CPI) dropped to 6.7% in August from 6.8% in July, contradicting the consensus forecast of an increase to 7.1%.

Moreover, the core CPI registered at 6.2% for the 12 months ending in August, down from 6.9% in July. These developments occurred alongside resurfacing concerns of a potential economic downturn and signs of a cooling labor market in the UK, aligning with market expectations.

Consequently, the focal point will remain fixed on the eagerly awaited policy decision by the Bank of England, set to be announced later in the day.

Investors will likely watch the upcoming data release from the United States (US) due on Thursday, including the weekly Initial Jobless Claims, Philadelphia Fed Manufacturing Survey, and Existing Home Sales Change.

• Gold price currently trades around $1,928 after seeing a rejection from the $1,948 mark.
• The Federal Reserve (Fed) held interest rates steady at the 5.25-5.50% range on Wednesday.
• Fed is expected to hike the rate one more time this year.
• The US weekly Jobless Claims, the Philly Fed, and Existing Home Sales will be due on Thursday.

Gold price (XAU/USD) experiences a partial recovery from its recent decline of around $1,928 during the Asian trading hours on Thursday. Gold price remains under selling pressure as the Federal Reserve (Fed) held the benchmark policy rates at 5.5% while delivering the hawkish remarks.

The Federal Reserve (Fed) held interest rates steady at the 5.25-5.50% range during its September meeting, as widely predicted in the market. Officials are more optimistic that they might curb inflation without damaging the economy or causing significant job losses. Fed Chairman Jerome Powell reaffirmed the Fed's commitment to achieving 2% inflation in a press conference. Powel added that the Fed is ready to raise rates if necessary.

According to the Fed's most recent quarterly predictions, the benchmark overnight interest rate may be hiked one more time this year to a peak range of 5.50% to 5.75%, and rates could be significantly tighter through 2024 than previously anticipated. Additionally, the Fed updated its Summary of Projections (SEP), indicating that Fed officials expect interest rates to reach 5.1% by the end of 2024 (from 4.6% prior). It’s worth noting that rising interest rates raise the opportunity cost of investing in non-yielding assets, implying a negative outlook for precious metals.

Gold traders will keep an eye on the US weekly Jobless Claims, the Philly Fed, and Existing Home Sales due later on Thursday. On Friday, the preliminary US S&P Global PMI for September will be released. These figures could provide a clear direction for gold price.

XAU/USD technical outlook

On the four-hour chart, gold price saw a rejection from the $1,948 mark following the Fed interest rate decision. The precious metal has remained well supported above the 100-hour Exponential Moving Average (EMA) at $1924.

Meanwhile, the Relative Strength Index (RSI) is located in the 40-60 zone, indicating a non-directional movement for gold price for the time being.

Resistance level: $1,950, $1,965 and $1,982

Support level: $1,924, $1,915 and $1,900

• USD/INR regains positive traction on Thursday and recovers a part of the previous day's losses.
• The technical setup remains tilted in favour of bulls and supports prospects for further gains.
• A convincing break below the 100/200-day SMAs confluence would negate the positive bias.

The USD/INR pair attracts fresh buyers near the 82.90 region on Thursday and reverses a part of the previous day's downfall from the 83.30 area, or over a one-month top. Spot prices currently trade just above the 83.00 mark and remain well within the striking distance of the all-time peak touched on August 15.

From a technical perspective, the fact that the USD/INR pair is holding comfortably above technically significant 100-day and 200-day Simple Moving Averages (SMAs) favours bullish traders. Moreover, oscillators on the daily chart are holding in the positive territory and are still far from being in the overbought one. This, in turn, suggests that the path of least resistance for spot prices is to the upside.

Hence, a subsequent strength beyond the overnight swing high, around the 83.30 region, en route to the 83.45 area or the YTD high, remains a distinct possibility. Some follow-through buying will be seen as a fresh trigger for bullish traders and set the stage for a further near-term appreciating move for the USD/INR pair.

On the flip side, the 82.90-82.80 area, might continue to protect the immediate downside. Any further decline is more likely to attract fresh buyers and remain limited near the 82.40-82.30 confluence, comprising the 100-day and the 200-day SMAs. The latter should act as a pivotal point, which if broken will make the USD/INR pair vulnerable to accelerate the corrective decline towards the 82.00 mark.

USD/INR daily chart

Technical levels to watch

• USD/JPY eases from the YTD peak touched earlier this Thursday, though lacks follow-through.
• Comments by Japan’s Matsuno fuel intervention fears and prompt some selling around the pair.
• The Fed's hawkish outlook continues to underpin the USD and helps limit losses for the major.
• The technical setup remains tilted in favour of bulls and supports prospects for a further move up.

The USD/JPY pair pulls back after hitting a fresh YTD peak, around the 148.45 region during the Asian session this Thursday, albeit lacks follow-through and manages to hold above the daily trough. Spot prices currently trade around the 148.25 area, down less than 0.10% for the day, and seem poised to appreciate further.

Against the backdrop of the recent breakout through the 146.50-146.60 strong horizontal barrier, the overnight sustained strength and a daily close above the 148.00 mark could be seen as a fresh trigger for bullish traders. The positive outlook for the USD/JPY pair is reinforced by the underlying bullish sentiment surrounding the US Dollar (USD), bolstered by the Federal Reserve's (Fed) hawkish outlook.

That said, comments by Japan’s Chief Cabinet Secretary Hirokazu Matsuno, saying that he won't rule out any options for response to FX moves, raises the risk of an intervention by authorities to prop up the domestic currency. Apart from this, speculations that the Bank of Japan (BoJ) could move away from the negative interest rates policy benefit the Japanese Yen (JPY) and cap the upside for the USD/JPY pair.

Technical indicators on the daily chart, meanwhile, are holding comfortably in the positive territory and are still far from being in the overbought zone. This, in turn, favours bullish traders and suggests that the path of least resistance for the USD/JPY pair is to the upside. Hence, any meaningful corrective decline below the 148.00 round figure might still be seen as a buying opportunity near the 147.70-147.65 area

The latter is closely followed by the weekly trough, around mid-147.00s, which if broken decisively might prompt some technical selling and drag the USD/JPY pair back towards the 147.00 round figure. Spot prices could then slide to the 146.50 horizontal support before eventually dropping to last week's swing low or sub-146.00 levels.

On the flip side, bulls might now wait for some follow-through strength beyond the 148.45 region, or the daily peak, before placing fresh bets. The subsequent move up has the potential to lift the USD/JPY pair towards the next relevant hurdle near the 148.80-148.85 region en route to the 149.00 round figure. The momentum could get extended further to the 149.70 area, above which spot prices could aim to reclaim the 150.00 psychological mark for the first time since October 2022.

USD/JPY 4-hour chart

Technical levels to watch

• USD/MXN trades higher on the back of the Fed's hawkish stance on interest rates trajectory.
• MACD indicates that recent strength may perish.
• 17.0000 psychological level lined up with the weekly low emerges as the key support.

USD/MXN continues to gain on the second successive day, trading higher around 17.1340 during the Asian session on Thursday. As anticipated, the US Federal Reserve (Fed) opted to keep the existing benchmark policy rates unchanged at 5.5% during the meeting held on Wednesday.

Fed projected an additional rate hike in 2023, which reinforces the strength of the USD/MXN pair. Moreover, in its monetary policy statement, the Federal Open Market Committee (FOMC) has revealed its expectation for slightly elevated inflation compared to its previous forecasts.

The immediate support for the USD/MXN pair appears around the 17.0000 psychological level lined up with the weekly low at 16.9985.

A break below the latter could help the pair to navigate the region around the 16.9000 psychological level.

On the upside, the seven-day Exponential Moving Average (EMA) at 17.1394 emerges as the immediate barrier, following the 17.1500 psychological level.

A firm break above the level could inspire the USD/MXN bulls to explore the region around the 17.1600 level aligned to the 23.6% Fibonacci retracement at the 17.1626 level.

The Moving Average Convergence Divergence (MACD) line remains above the centerline, but it exhibits a pattern of divergence beneath the signal line. This pattern indicates that the recent strength in the USD/MXN pair may perish.

However, the pair’s momentum is neutral as the 14-day Relative Strength Index (RSI) lies on the 50 level.

USD/MXN: Daily Chart

• GBP/JPY meets with a fresh supply on Thursday and drops to its lowest level since August 9.
• Expectations for an imminent pause in the BoE's rate-hiking cycle weigh on the British Pound.
• Intervention fears, bets for a shift in the BoJ's policy stance boost the JPY and exert pressure.

The GBP/JPY cross comes under some renewed selling pressure during the Asian session on Thursday and drops to the 182.40 area, or its lowest level since August 9 in the last hour.

The British Pound (GBP) continues with its relative underperformance in the wake of expectations for an imminent pause in the Bank of England's (BoE) rate-hiking cycle, which, in turn, is seen weighing on the GBP/JPY cross. Data released from the UK on Wednesday showed that the annual headline CPI fell to 6.7% in August from 6.8% in July, defying the consensus forecast for a rise to 7%. Moreover, importantly the core CPI – excluding volatile food, energy, alcohol and tobacco prices – came in at 6.2% in the 12 months to the end of August, down from 6.9% in July. The markets were quick to react and scaled back bets for a BOE rate hike to reflect a 50:50 chance of a hold.

The Japanese Yen (JPY), on the other hand, gets a minor lift in reaction to comments by Japan’s Chief Cabinet Secretary Hirokazu Matsuno, saying that he won't rule out any options for response to FX moves. This raises the risk of an intervention by authorities to prop up the domestic currency. Apart from this, speculations that the Bank of Japan (BoJ) could move away from the ultra-loose policy, along with a softer risk tone, benefit the safe-haven JPY and exert additional pressure on the GBP/JPY cross. BoJ Governor Kazuo Ueda had said that ending negative interest rates is among the options available if the central bank becomes confident that prices and wages will keep going up sustainably.

It, however, remains to be seen if bearish traders can maintain their dominant position or opt to lighten their bets ahead of the key central bank event risks – the crucial BoE policy decision on Thursday, followed by the highly-anticipated BoJ meeting on Friday. Nevertheless, the aforementioned fundamental backdrop seems tilted in favour of bearish traders. Adding to this, this week's repeated failures near the 50-day Simple Moving Average (SMA) support breakpoint, now turned resistance, suggests that the path of least resistance for the GBP/JPY cross is to the downside. Hence, any attempted recovery move might still be seen as a selling opportunity and fizzle out rather quickly.

Technical levels to watch

Japan’s Chief Cabinet Secretary Hirokazu Matsuno told a news conference on Thursday, he “won't rule out any options for response to FX moves.”

Additional comments

Market reaction

USD/JPY is trading on the back foot near 148.25 following the Japanese verbal intervention, down 0.05% on the day.

• AUD/USD retreats further from a three-week high and is pressured by sustained USD buying.
• The Fed's hawkish outlook remains supportive of rising US bond yields and underpins the buck.
• A softer risk tone also contributes to driving flows away from the risk-sensitive Australian Dollar.

The AUD/USD pair extends the previous day's sharp retracement slide from levels just above the 0.6500 psychological mark, or a nearly three-week high, and continues losing ground through the Asian session on Thursday. The downward trajectory drags spot prices to the lower end of the weekly range, around the 0.6420-0.6415 region, and is sponsored by sustained US Dollar (USD) buying.

In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, climbs closer to a six-month peak touched last week and remains well supported by the Federal Reserve's (Fed) hawkish outlook. As was widely anticipated, the US central bank decided to leave interest rates unchanged at the end of a two-day monetary policy meeting on Wednesday. The Fed, however, left the door open for one more 25 bps lift-off in 2023 and maintained its forecast for rates to peak at 5.5% to 5.75% by the end of this year. Moreover, policymakers now see the benchmark rate at 5.1% next year, suggesting just two rate cuts in 2024 as compared to four rate cuts projected previously.

This reaffirms a higher-for-longer narrative pushes the yield on the rate-sensitive two-year US government bond to a 17-year high. Furthermore, the benchmark 10-year yield has climbed to its highest since late 2007, which, along with a softer risk tone, is seen underpinning the safe-haven buck and exerting additional pressure on the risk-sensitive Australian Dollar (AUD). Apart from this, China's conservative approach to introducing more stimulus measures and speculations that the Reserve Bank of Australia (RBA) might have ended its rate-hiking cycle contribute to the offered tone surrounding the AUD/USD pair. This, in turn, suggests that the path of least resistance for spot prices is to the downside.

Even from a technical perspective, the formation of a bearish flag pattern on short-term charts validates the negative outlook for the AUD/USD pair. That said, it will be prudent to wait for a sustained break below the 0.6400 mark before positioning for any further depreciating move. Market participants now look to the US economic docket – featuring the usual Initial Weekly Jobless Claims, Philly Fed Manufacturing Index and Existing Home Sales data. This, along with the US bond yields and the broader risk sentiment, might influence the USD price dynamics and produce short-term trading opportunities around the AUD/USD pair ahead of Friday's release of flash PMI prints.

Technical levels to watch

• EUR/USD extends losses due to Fed’s projection on rate hike in 2023
• Fed maintained its existing benchmark policy rates at 5.5%.
• ECB’s indication of ending the policy tightening cycle exerts pressure on the EURO.

EUR/USD continues the losing streak for the third successive day, trading lower around 1.0640 during the Asian session on Thursday. As anticipated, the US Federal Reserve (Fed) opted to keep the existing benchmark policy rates unchanged at 5.5% during the meeting held on Wednesday.

Fed projected an additional rate hike in 2023, which reinforces the downward pressure on the EUR/USD pair. Moreover, in its monetary policy statement, the Federal Open Market Committee (FOMC) has revealed its expectation for slightly elevated inflation compared to its previous forecasts.

While the monetary policy statement largely mirrored the previous decision, the sudden strengthening of the US Dollar (USD) was primarily attributed to the Federal Reserve officials' unexpected upward revision of their projected interest rates for 2024, increasing them from 4.6% to 5.1%.

This adjustment played a crucial role in the rapid appreciation of the Greenback against the Euro. US Dollar Index (DXY) extends its gains and trades a six-month high of around 105.50 at the time of writing.

Elevated US Treasury yields helping the buck to rise. The yield on 10-year US note rose to 4.43% by the press time, the highest since 2007.

In a press conference conducted right after the rate call, Fed Chair Jerome Powell reaffirmed the Fed's commitment to reaching its long-term inflation target of 2%.

Powell mentioned that the central bank is likely approaching the peak of its interest rate hike cycle but emphasized that future policy decisions would be data-driven.

On the other side, the Euro is under pressure since the European Central Bank (ECB) has communicated a clear signal that its 14-month-long policy tightening cycle may have reached its zenith, as it has elevated its main interest rate to an unprecedented level of 4%.

Furthermore, the downward revisions of CPI and GDP growth projections for the upcoming years, specifically 2024 and 2025, have reinforced the notion that additional rate hikes may not be on the immediate horizon.

The traders of the EUR/USD pair will likely watch Thursday when more US data is due with the weekly Initial Jobless Claims, Philadelphia Fed Manufacturing Survey, and Existing Home Sales Change. On the Eurozone docket, preliminary Consumer Confidence and ECB's President Lagarde's speech will be eyed.

• WTI prices remain under selling pressure at around $88.80 after the Federal Reserve (Fed) meeting.
• The higher-for-longer interest rate narrative in the US exerts pressure on oil prices.
• EIA crude oil stockpiles declined by 2.135M barrels compared to an increase of 3.954M in the previous week.

Western Texas Intermediate (WTI), the US crude oil benchmark, is trading around $88.80 so far on Thursday. WTI prices face some follow-through selling to nearly a weekly low of 88.60 after the Federal Reserve (Fed) held the interest rate unchanged and delivered hawkish comments on Wednesday.

In a press conference, Fed Chairman Jerome Powell reaffirmed the Fed's commitment to achieving 2% inflation and added that the US central bank is ready to raise rates if necessary. That said, the higher for longer interest rate narrative in the US exerts pressure on the oil prices. It's worth noting that higher interest rates raise borrowing costs, which can slow the economy and diminish oil demand.

Saudi Crown Prince Mohammed bin Salman said on Wednesday that OPEC's decision to cut oil production was based on market stability and was not intended to help Russia wage its war in Ukraine. In recent weeks, voluntary oil output cuts by Saudi Arabia and Russia, the world's two largest oil exporters boosted WTI prices. Two nations announced prolonged oil output curbs until the end of 2023. Saudi oil output will be closer to 1.3 million barrels per day through the end of 2023.

Apart from this, the American Petroleum Institute (API) reported on Wednesday that US crude oil inventories fell nearly 5.25M barrels for the week ending September 15 from the previous reading of 1.174M barrels rise. The market consensus expected a 2.7 million-barrel decline. During the same period, EIA reported that crude oil stockpiles declined by 2.135M barrels compared to an increase of 3.954M in the previous week, while the market anticipated a drawdown of 2.2M barrels.

Looking ahead, oil traders will take cues from the US weekly Jobless Claims, the Philly Fed, and Existing Home Sales due later on Thursday. The preliminary US S&P Global PMI for September will be released on Friday. These events could significantly impact the USD-denominated WTI price. Oil traders will take cues from the data and find trading opportunities around the WTI prices.

The People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Thursday at 7.1730, compared with the previous day's fix of 7.1732 and 7.3052 estimated.

Furthermore, the PBoC injects 169 billion Yuan into Open Market Operations (OMOs) via 7-day reverse repos (RRs) at an unchanged rate of 1.8%.

• USD/CHF prolongs its two-month-old uptrend and climbs to its highest level since late June.
• The Fed's hawkish outlook, rising US bond yields underpin the USD and remain supportive.
• Investors now look to the SNB policy meeting for some impetus ahead of the US macro data.

The USD/CHF pair touches its highest level since late June during the Asian session on Thursday, with bulls now looking to build on the momentum further beyond the 0.9000 psychological mark.

The US Dollar (USD) builds on the previous day's hawkish Federal Reserve (Fed)-inspired recovery from over a one-week low and has now moved well within the striking distance of a six-month high, which, in turn, acts as a tailwind for the USD/CHF pair. The US central bank, as was anticipated, decided to leave the benchmark federal funds rate unchanged on Wednesday, though signalled one more rate hike by the end of this year. In fact, the so-called 'dot-plot' forecasted rates to peak at 5.5% to 5.75% in 2023. Adding to this, policymakers now see the benchmark rate at 5.1% next year, suggesting just two rate cuts in 2024 as compared to four rate cuts projected previously.

This reaffirms a higher-for-longer narrative and pushes the yield on the rate-sensitive two-year US government bond to a 17-year high. Furthermore, the benchmark 10-year yield has climbed to its highest since late 2007, which continues to boost the Greenback and assists the USD/CHF pair to prolong its strong upward trajectory witnessed over the past two months or so. With the latest leg up, spot prices have now rallied around 450 pips from the July swing low, though some follow-through buying and acceptance above the 0.9000 mark is needed to support prospects for additional gains. The market focus now shifts to the Swiss National Bank (SNB) policy meeting, due this Thursday.

The current market pricing indicates a greater possibility that the SNB will hike interest rates for the sixth successive time in SSeptember That said, the recent slew of weak real economy data, sub-2% readings on the headline and core inflation, and the strengthening of the Swiss Franc (CHF) against its European counterpart might force the central bank to limit any further tightening. Hence, the accompanying monetary policy statement will be scrutinized for cues about the future rate-hike path and provide some impetus to the USD/CHF pair.

Later during the early North American session, the US economic docket – featuring the usual Initial Weekly Jobless Claims, Philly Fed Manufacturing Index and Existing Home Sales data – will also be looked upon for short-term opportunities. Nevertheless, the aforementioned fundamental backdrop seems tilted in favour of the USD bulls and suggests that the path of least resistance for the USD/CHF pair is to the upside. Hence, any immediate market reaction to a more hawkish SNB is more likely to be seen as an opportunity for bullish traders and remain limited.

Technical levels to watch

• USD/CAD gains traction around 1.3485 amid the renewed USD demand.
• The Federal Reserve (Fed) maintained interest rates and indicated a possible further hike before year-end.
• A decline in oil prices exerts pressure on the Canadian Dollar (CAD).
• Market players await US weekly Jobless Claims, Canadian Retail Sales due later this week.

The USD/CAD extends its upside and trades in positive territory for the second consecutive day during the early Asian session on Thursday. The rebound in the pair is supported by the hawkish stance of the Federal Reserve (Fed) after its policy meeting on Wednesday and the revised interest rate expectations for 2024. The pair currently trades near 1.3485, gaining 0.18% on the day.

At its September meeting, The Federal Reserve (Fed) kept interest rates unchanged at 5.25-5.50% as widely expected in the market. Officials are becoming more confident that they could lower inflation without harming the economy or causing major job losses.

In a press conference, Fed Chairman Jerome Powell reaffirmed the Fed's commitment to achieving 2% inflation. He added that maintaining rates does not indicate the Fed's policy stance, and the US central bank is ready to raise rates if necessary. According to the Fed's most recent quarterly predictions, the benchmark overnight interest rate may be hiked one more time this year to a peak range of 5.50% to 5.75%, and rates could be significantly tighter through 2024 than previously anticipated.

Additionally, the Fed revised its Summary of Projections (SEP), indicating that Fed officials estimate the interest rate to hit 5.1% by the end of 2024 (from 4.6% prior). The higher-for-longer rate narrative has propelled the US Dollar against its rivals and acts as a tailwind for the USD/CAD pair.

On the Loonie front, a decline in oil price has undermined the commodity-linked Loonie as the country is the leading oil exporter to the United States. Data released on Tuesday showed that Canadian Consumer Price Index (CPI) in August surged to 4.0% YoY from 3.3% in July. Meanwhile, the core CPI that excludes volatile oil and food prices rose to 3.3% YoY from 3.2% in the previous reading. These figures might convince the Bank of Canada (BoC) to raise interest rates yet further.

In a speech after the publication of the data, BoC Deputy Governor Sharon Kozicki said that ups and downs of the size we've seen in the past couple of months are not that unusual which is why the central bank focuses on measures of core inflation.

Looking ahead, the US weekly Jobless Claims, the Philly Fed, and Existing Home Sales will be due on Thursday. On Friday, the preliminary US S&P Global PMI for September and Canadian Retail Sales for July will be released. Traders will take cues from these data and find trading opportunities around The USD/CAD pair.

• Gold price continues to lose after the Fed interest rate decision.
• Fed kept its current benchmark policy rates at 5.5%.
• Precious metal is under pressure on the Fed’s projection of an additional rate hike in 2023.

Gold price extends losses on the third consecutive day, trading lower around $1,925 during the early trading hours of the Asian session on Thursday. As expected, the US Federal Reserve (Fed) maintained current benchmark policy rates at 5.5% in the meeting held on Wednesday.

The price of precious metal is facing downward pressure as the Fed projects an additional rate hike in 2023. Furthermore, the Federal Open Market Committee (FOMC) has disclosed in its monetary policy statement, anticipating slightly higher inflation than its previous forecasts.

Although the monetary policy statement remained largely consistent with the previous decision, the unexpected surge in the value of the US Dollar (USD) was primarily driven by the Fed officials' decision to revise their projected interest rates for 2024, elevating them from 4.6% to 5.1%. This adjustment played a pivotal role in the rapid appreciation of the Greenback.

US Dollar Index (DXY), which measures the performance of the US Dollar (USD) against the six other major currencies, continues to gain and trades around a six-month high level at 105.60 at the time of writing.

US Treasury yields rose, with the 10-year rising to 4.43% by the press time, the highest since 2007, boosting the Greenback.

The precious metal slipped after Fed Chair Jerome Powell’s press conference to outline the Fed's position. Powell reaffirmed the Fed's commitment to reaching its long-term inflation target of 2%.

While he acknowledged that the Fed is likely approaching the peak of its interest rate hike cycle, he emphasized that the Fed will continue to make its future decisions based on data-driven analysis.

The impact of the Fed meeting will continue on Thursday when more US data is due with the weekly Initial Jobless Claims, Philadelphia Fed Manufacturing Survey, and Existing Home Sales Change.

• GBP/USD drifts lower for the second straight day and touches a fresh multi-month low.
• The Fed's hawkish pause continues to underpin the USD and exerts pressure on the pair.
• Expectations for a pause in the BoE's rate-hiking cycle also contribute to the offered tone.

The GBP/USD pair remains under some selling pressure for the second successive day on Thursday and drops closer to the 1.2300 round figure, or a fresh low since early June during the Asian session.

The US Dollar (USD) manages to preserve the previous day's post-FOMC recovery gains from over a one-week low and remains well within the striking distance of a six-month high, which, in turn, is seen exerting pressure on the GBP/USD pair. As was widely anticipated, the Federal Reserve (Fed) decided to leave interest rates unchanged, though maintained its forecast for rates to peak at 5.5% to 5.75% this year, keeping the door open for one more 25 bps lift-off in 2023. Moreover, policymakers now see the benchmark rate at 5.1% next year, suggesting just two rate cuts in 2024 as compared to four rate cuts projected previously.

The higher-for-longer narrative keeps the US Treasury bond yields elevated, which, along with a softer risk tone, continues to underpin the safe-haven Greenback. In fact, the yield on the two-year US government bond shot to a 17-year and the benchmark 10-year Treasury note touched its highest since late 2007. This, in turn, fuels worries about economic headwinds stemming from rapidly rising borrowing costs and tempers investors' appetite for riskier assets. Apart from this, expectations for an imminent pause in the Bank of England's (BoE) rate-hiking cycle continue to weigh on the British Pound and drag the GBP/USD pair.

Market pricing swung drastically after data released from the UK on Wednesday showed that the annual headline CPI fell to 6.7% in August from 6.8% in July, defying consensus forecast for a rise to 7%. Moreover, importantly the core CPI – excluding volatile food, energy, alcohol and tobacco prices – came in at 6.2% in the 12 months to the end of August, down from 6.9% in July. This comes on top of reviving recession fears and signs that the UK labour market is cooling, reaffirming market expectations. Hence, the focus will remain glued to the highly-anticipated BoE policy decision, scheduled to be announced later this Thursday.

Later during the early North American session, traders will take cues from the US economic docket – featuring the usual Initial Weekly Jobless Claims, Philly Fed Manufacturing Index and Existing Home Sales data. This, along with the US bond yields and the broader risk sentiment, might influence the USD price dynamics and provide some impetus to the GBP/USD pair. Nevertheless, the aforementioned fundamental backdrop seems tilted in favour of bearish traders and suggests that the path of least resistance for spot prices remains to the downside. Hence, any attempted recovery might get sold into and is more likely to remain capped.

Technical levels to watch

• USD/JPY gains momentum near 148.41 following the Federal Reserve's (Fed) hawkish stance.
• Fed kept interest rates unchanged at 5.25-5.50% range.
• Fed’s Hawkish stance and verbal intervention exert pressure on the Japanese Yen.
• Bank of Japan (BoJ) rate decision will be in the spotlight.

The USD/JPY pair surges above the 148.00 mark after bouncing off the 147.47 low during the early Asian trading hours on Thursday. The upside in the US Dollar (USD) is bolstered by the hawkish stance of the Federal Reserve (Fed) following Wednesday’s policy meeting. As of writing, the pair is trading at 148.41, up 0.05% on the day. However, traders remain cautious as Japanese authorities made a verbal intervention early on Wednesday.

At its September meeting, the Federal Reserve (Fed) kept interest rates unchanged at 5.25-5.50%. Officials are becoming more confident that they could lower inflation without harming the economy or causing major job losses. According to the Fed's most recent quarterly predictions, the benchmark overnight interest rate may be hiked one more time this year to a peak range of 5.50% to 5.75%, and rates could be significantly tighter through 2024 than previously anticipated.

Furthermore, the Fed revised its Summary of Projections (SEP), indicating that Fed officials estimate the interest rate to hit 5.1% by the end of 2024 (from 4.6% prior). Despite the Fed maintaining rates stable at 5.5% for the time being, the higher for longer rate narrative has propelled the US Dollar against its rivals.

On the other hand, the Bank of Japan (BoJ) interest rate decision will be the highlight on Friday. BoJ is widely expected to keep its short-term interest rate target of -0.1% and its 10-year bond yield target of around 0%. The Japanese central bank has previously declared that monetary policy shifts would not be considered until local wage and inflation data meet its projections.

Apart from this, traders turn to a cautious mood amid the fear of verbal intervention. Former top currency diplomat Takehiko Nakao told Reuters on Wednesday that Japanese authorities could intervene again to support the yen if it declines further. Earlier, Japan's top currency diplomat Masato Kanda said that Japanese authorities are dealing with FX moves with a high sense of urgency. This, in turn, exerts some selling pressure on the Japanese Yen (JPY) and acts as a tailwind for USD/JPY.

Moving on, the US weekly Jobless Claims, the Philly Fed, and Existing Home Sales will be due on Thursday. The attention will shift to Friday's Bank of Japan (BoJ) meeting decision. Traders will take cues from these events and find trading opportunities around the USD/JPY pair.